Energy is a strategic resource. It underpins India’s prosperity and security. Energy security implies securing uninterrupted energy supplies at affordable prices and in an equitable manner for economic growth and household consumption. A substantial part of India’s energy needs are met from the import of crude oil, liquefied natural gas and uranium. These supplies are sensitive to geopolitical developments on which India may have no control. Having a proactive and nuanced foreign policy becomes key to addressing energy security concerns.
India faces five key challenges to energy security. First, it has to reduce its widening demand-supply gap; second, it has to mange the security of the sea lanes through which much of its energy imports pass; third, it should address the geopolitical risks to energy supplies; fourth, it must negotiate well its vital interests in highly complex negotiations on climate change; and fifth, it must invest in renewable and unconventional sources of energy. These concerns need to be factored in India’s foreign policy.
On the assumption of an economic growth of 9 per cent per annum for the next two decades, the planning commission has estimated that India will require increasing its installed capacity of electricity generation from the present 1,60,000 MWe to 9,60,000 MWe by 2031. Coal is the most important fuel for India as it meets 53 per cent of the primary energy needs, followed by oil at 30 per cent and natural gas at 10 per cent. The rest is met by hydro, nuclear and renewable energy sources.
India’s requirements of coal will increase from 420 MT to over 2 to 3 billion tonnes per annum by 2031-’32. India is already importing coal from Australia and Indonesia. India imported coal worth $7 billion from Australia in 2011-’12. Investing in coal mines abroad has emerged as an important trend in India’s foreign policy.
The Integrated Energy Policy of the government has many suggestions in this regard ranging from measures to improve energy efficiency, reforming the energy pricing system to increased focus on renewable energy sources.
According to government’s estimates, import dependence on oil is expected to increase from 76 per cent from 2010-’11 to 80 per cent by the end of 12th plan; that of natural gas will increase from 19 per cent to 28 per cent; and that of coal from 19.8 per cent to 22.1 per cent. The continuing heavy dependence on import of primary energy has major implications for energy security, national security and foreign policy.
India has sought to increase investments in oil, gas and coal fields abroad to augment its energy resources. Oil public sector undertakings (PSUs) have invested over Rs 64,000 crore aboard. ONGC has 40 projects in 15 countries; IOCL has nine projects in six countries; OIL has 12 projects in eight countries, BPCL has 12 projects in seven countries; GAIL has four projects in two countries and HPCL has two projects in two countries. Petronet LNG Limited (PLL) imported 8.64 million metric tonnes of LNG at its Dahej terminal. It is also securing large contracts in Western Australia. Possibilities are also being explored to import shale gas from the United States.
With India sourcing its oil and gas supplies from the Middle East, Africa, Latin America, South East Asia and Oceania, the safety and security of energy transportation routes has emerged as a second major challenge. Piracy in the Gulf of Aden has become a major global security issue. Nearly 25 per cent of attacks on ships passing through the region are oil tankers. The Indian Navy has been deployed in the region to provide security to Indian and foreign merchant fleets. So far it has safely escorted close to 2,000 ships.
The third challenge is to mange the geopolitical risks to energy supplies. The geopolitical tensions lead to uncertainties in oil prices and raise apprehensions about disruptions in production and transportation. The oil demand in OECD countries has become flat. The US is likely to emerge as a net exporter of shale gas in the next few years as its dependence upon imports from the Middle East reduces to near zero. The Arctic Sea region is expected to emerge as a major source of hydrocarbons as the arctic ice melts and the northern sea route opens up shortening the distance between Europe and China. Africa and Latin America will emerge as producers of oil as production of oil and gas from the OPEC region flattens. Most of the demand for oil in the next 20 years will come from developing countries in Asia including China and India. Greater focus will be placed on the renewable energy R&D and innovation. Nuclear energy renaissance, which received a setback due to the Fukushima nuclear disaster is likely to pick up. India will need to track these changes and understand their impact on country’s energy security. This will require engagement with multiple international actors and cooperation to secure the country’s energy security interests.
The fourth challenge is to work towards a climate deal which safeguards India’s interests. India will have to ensure that its developmental priorities are not constrained due to restrictions on emissions. A sophisticated negotiating strategy will have to be adopted.
The fifth challenge for India’s energy diplomacy will be to facilitate transfer of technology and investments in clean technologies. The share of renewable energy in India’s energy mix is currently very small but potential exists for enlarging this share. Solar, wind and hydroelectric potential needs to be exploited to the fullest. India can also look at space-based solar energy projects. Unconventional sources of energy like shale gas, coal bed methane also need to be exploited. India will have to invigorate its nuclear energy programme that has been under a cloud due to concerns over safety. Safety concerns will need to be addressed to the satisfaction of the public.
There has to be an all-out effort to increase energy efficiency through a combination of technological measures and policy reform. India has launched an ambitious National Action Plan for Climate Change that brings many of these elements together. This programme must be implemented efficiently and in a timely manner.
Energy security is emerging as a core concern in India’s foreign policy. In a welcome development, the Ministry of External Affairs has upgraded the energy security unit to a full fledged division headed by a joint secretary level officer. India is participating in a number of international fora concerned with energy issues. However, the energy diplomacy alone cannot be sufficient. The subject of energy security is dealt by a plethora of ministries, departments and agencies. It is not clear who is in charge for energy security. Energy diplomacy must be conducted in synergy with the domestic efforts to ensure energy security for the country.
Arvind Gupta is director general, Institute for Defence Studies and Analyses (IDSA), New Delhi.